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Hadfield v ACN 092 328 400 Pty Ltd [2011] NSWSC 114 | Case summary | Zoe

NSWNSWSC

Hadfield v ACN 092 328 400 Pty Ltd

[2011] NSWSC 114

Supreme Court of NSW|2011-03-03|Before: Barrett J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2011-03-03

Before

Barrett J

Source

Original judgment source is linked above.

Judgment (2 paragraphs)

[1]

Judgment 1These are my reasons for having made, on 3 March 2011, the following substantive order and declaration: "1. An order, pursuant to s.274 of the Corporations Act, that the misstatement in the Australian Register of Company Charges consisting of the recording of '23/06/2010' as the date of creation of a charge, being a recording in consequence of lodgment of Form 309 lodged on 11 August 2010 by Redman Hale Simpson, Solicitors (Barcode 0266448819) in respect of ACN 092 328 400 Pty Ltd (formerly called Australian Metal Spinning Pty Ltd), be rectified by instead recording 27/07/2010 as the date on which property subject to a charge was acquired. 2. A Declaration that the charge in respect of ACN 092 328 400 Pty Ltd (formerly called Australian Metal Spinning Pty Ltd) recorded in ASIC Charge Number 2030325 in favour of Kevin Hadfield and Vicki Jane Hadfield lodged on 11/08/2010 be declared to be and is a valid and subsisting charge." 2The proceedings were brought by Mr Hadfield and Mrs Hadfield, the directors and shareholders of ACN 092 328 400 Pty Ltd (formerly Australian Metal Spinning Pty Ltd) and the chargees under a charge created by that company. 3The company created a charge caught by Chapter 2K of the Corporations Act 2001 (Cth) in circumstances that became productive of doubts as to the date of the charge's creation. The charge was a floating charge on the assets and undertaking generally and operated, as to certain items, as a fixed charge. The chargees were, as I have said, Mr Hadfield and Mrs Hadfield. 4The doubts about the date of the charge's creation arose from the fact that the instrument of charge was dated 25 June 2010 whereas extrinsic evidence suggested that the instrument was in fact executed and made operative on 27 July 2010. 5The extrinsic evidence is as follows:

The instrument of charge was executed by the company by means of the signatures of Mr Hadfield and Mrs Hadfield.
Mr Hadfield says on affidavit that he is "certain" that the instrument was executed on 27 July 2010.
Mrs Hadfield says on affidavit that she is "certain" that the instrument was executed on 27 July 2010.
Mr Spaul, the Hadfields' accountant, deposes that he advised them in mid-July 2010 that a charge should be created.
Mr Simpson, solicitor, prepared the charge document. His diary records a meeting with Mr Hadfield and Mrs Hadfield on 27 July 2010.
Mr Louttit, who is now the liquidator of the company, gave evidence on affidavit that he had been informed by Mr Simpson that Mr Hadfield and Mrs Hadfield had signed the instrument on 27 July 2010 and that he (Mr Simpson) then dated it 23 June 2010. 6The significance of 23 June 2010 and the apparent back-dating to that day emerges from the evidence of the same witnesses. On 23 June 2010, the company paid off secured indebtedness owed to financiers. It did so from the proceeds of the sale of the company's premises, supplemented by funds lent by Mr Hadfield and Mrs Hadfield and obtained by them upon the security of a mortgage of their home. 7Mr Hadfield was later advised by Mr Spaul that he and Mrs Hadfield should take a charge to secure the moneys previously lent by them to the company. I am satisfied, on the evidence before me, that this advice was given in mid-July 2010 and that Mr Hadfield and Mrs Hadfield signed the charge document on 27 July 2010 during a meeting with Mr Simpson, leaving it undated. It may be presumed that Mr Simpson, when dating the executed document on or after 27 July 2010, thought it appropriate to portray the charge as having been given when the moneys were advanced. 8The finding that the date of creation of the charge was 27 July 2010 means that the lodgment with Australian Securities and Investments Commission effected in respect of it (which resulted in registration on 11 August 2010, as evidenced by an ASIC extract annexed to Mr Louttit's affidavit) was made within the period of 45 days referred to in s 263(1). 9The relevant entry in the Australian Register of Company Charges, however, showed the date of creation as 23 June 2010, consistently with the date on instrument of charge and the particulars lodged in respect of it. My finding as to the date of creation means that the register contains a misstatement. The power under s 274 to order rectification of misstatements was therefore activated and it is that power that the court exercised in making order 1 above. The order was made on the application of Mr Hadfield and Mrs Hadfield, each of them (as a chargee and also as a director and member of the company) being a "person interested" as referred to in s 274. 10I have mentioned that Mr Louttit is the liquidator of the company. He became the liquidator upon the imposition of creditors voluntary winding up through resolutions passed by Mr Hadfield and Mrs Hadfield as the only directors and members of the company. This winding up commenced on 11 August 2010 - coincidentally, the date of registration of the charge. 11As is shown by the evidence I have accepted, the advance made by Mr Hadfield and Mrs Hadfield to the company on 23 June 2010 did not become secured by the charge until its creation of the charge on 27 July 2010, so that the charge was granted wholly in consideration of a past advance. This caused Mr Louttit to pay attention to s 588FJ of the Corporations Act . The reason is found in s 588FJ(1), coupled with s 588FJ(2)(a): "(1) This section applies if: (a) a company is being wound up in insolvency; and (b) the company created a floating charge on property of the company at a particular time that is at or after 23 June 1993 and: (i) during the 6 months ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. (2) The charge is void, as against the company's liquidator, except so far as it secures: (a) an advance paid to the company, or at its direction, at or after that time and as consideration for the charge; ..." 12The "relation-back" day was, in the circumstances, the day on which the special resolution for voluntary winding up was passed, that is, 11 August 2010: see s 513B(e). The charge created on 27 July 2010 was therefore created during the period of six months referred to in s 588FJ(1)(b)(i). 13Ultimately, however, I did not understand counsel for Mr Louttit to press the proposition that s 588FJ might apply. The applicability of the section is, in terms of s 588FJ(1)(b), confined to a case where the relevant company "is being wound up in insolvency". 14Section 9 contains a definition of "wound up by the Court" as follows: "'wound up by the Court' includes wound up in insolvency." 15There is a corresponding definition of "winding up by the Court". 16There is no definition of "wound up in insolvency" or "winding up in insolvency" but the meaning of those phrases in the Corporations Act sufficiently emerges from a number of provisions. 17Under s 459A, for example, the court may, on an application under s 459P, "order that an insolvent company be wound up in insolvency". Section 459B allows the making of "an order that the company be wound up in insolvency" upon certain kinds of applications not based on s 459P, specifically, applications under s 234, s 462 and s 463. 18These and other provisions show that winding up "in insolvency" is, as the definitions of "wound up by the Court" and "winding up by the Court" imply, a particular kind of winding up imposed by and resulting from an order of the court. 19It follows that a voluntary winding up - even a creditors voluntary winding up - does not cause a company to be in a state of being "wound up in insolvency". 20I would add that the fact that a company is subject to creditors voluntary winding up of itself says nothing about whether the company is insolvent. The voluntary winding up that results from the passing of a special resolution under s 491 is a creditors voluntary winding up unless the directors comply with the s 494 provisions concerning declaration of solvency. The directors have a choice in that matter. It is entirely up to them whether they make a declaration of solvency. The fact that they do not make such a declaration is not persuasive either way on the factual question of insolvency. 21The matters to which I have referred concerning the construction of s 588FJ were canvassed with counsel in the course of the hearing and formed the basis of my decision on that aspect of the case, namely that the section did not apply since, in the absence of an order for winding up in insolvency, the company was not one that "is being wound up in insolvency". Subsequent research shows that that conclusion is consistent with the decision in Re Carter (as liquidator of New Tel Ltd) [2003] NSWSC 128; (2003) 44 ACSR 661. Austin J there held that the form of creditors voluntary winding up that follows on from Part 5.3A voluntary administration does not, in terms of s 588FJ(1)(a), cause the affected company to be one that "is being wound up in insolvency". Austin J expressed the opinion, at [15] that " s 588FJ is available only where the company is being wound up by virtue of an order under s 459A" - to which one should, in my view, add "or s 459B". 22Given the particular form of winding up, s 588FJ was irrelevant to this case. It this, coupled with the evidence about lodgment of particulars and registration of the charge, that made it appropriate to make the declaration in item 2 at paragraph [1] above.